We’re sad to announce our sale of 4315 Jack St.  This property was purchased mid last year (2012).  It was a mess and we had a great time fixing it up.  Even though we had it less than a year, we were able to repaint the exterior, upgrade (heavily) 9 of the 10 units, clear out massive amounts of trash, demo the old shed and parking roof, and stabilize the income — raising it by 45% (to renters that rent increase sounds like a bad thing, but it’s the stabilized market rent that allows for upgrades and repairs to the property. The previous rent was a large factor in why the property was distressed and ultimately sold to us).

Our job there is now done and it’s time for a new owner to take it to the next level. The new owner is an experienced operator in the area and we’re sure she’ll do great.

So why are we sad, and why did we sell?  We’re first and foremost a company interested in growth and adding more units to our holdings.  However, the reality of financing in today’s market dictates much of what we do.  By selling the property on Jack, we are able to fund the growth of much larger properties (which may be sold at some point to fund even more).  A more complicated answer involves a moment towards additional leverage as there was a lot of equity in the property. A less complicated answer is that if financing were easy, we’d likely never sell anything.

At the same time, we’re happy to announce that we’ve now officially purchased the Wipprecht property.  We had been managing it for a few weeks in preparation of buying, but the ink is now dry and it’s a done deal.  We’re VERY excited to get this place cleaned up.  Stay tuned for some interesting before and after pictures!

According to this interesting story, yes.  When people ask us why we invest so much in Houston, it’s stories like these that help us answer that question.

Another reason we love Houston.

 

Well folks, it’s not much to look at from the outside today, but we’ll be working on it.  The property consists of an 8 unit building, a 4 unit building  and an empty lot for parking.  Address is 3721 Tuam, Houston TX, 77004.

Each unit is a 2 bedroom / 1 bath.  The good new is: We’re going to be renting them cheap while we work on the place.  The rent will be $400 for a 2 bedroom (about a third of what it would be a few miles away in Montrose), and we’ll offer an “All Bills Paid” option if someone wants it for $100/month.  So $500 for an all-bills-paid two bedroom.  Minutes from downtown, Montrose, Heights, Rice University, Medical Center, the new rail line, and University of Houston.

So you’re excited, I know.  You must have a unit now. I get it. Well, contact us to view and lock it up!(Picture is of the four unit building. Off street parking. We don’t have interior shots at this time)

As we celebrate 4 months with the property, we thought we’d share a bit of what’s been done.  Our accounting is normally done on the trailing month, so we don’t have February numbers yet. This will be from October 15th to Feb 1.  So 3 and a 1/2 months.  Less than 16 weeks, but we’ll round up.

While we haven’t been able to do as much “prettying up” on the outside, there has been much more ‘under the hood’ work to do that anyone realized.  Once we got our hands on the property and started to dig in, we got to see just how big of a project it was.  Each time we try to pull guys off to do “pretty-up” projects, they get pulled to upgrade a unit for a new tenant, or troubleshoot an electrical issue, or fix a leaking pipe, or to replace a window, or to toss someone out (kidding about that last one… Maybe… 🙂

After four “short” months, we feel we’re over the hump.  We have many of the units upgraded and a stable tenant base to move forward   We can finally hit some projects we’ve been dying to do like landscaping, exterior paint, windows, and more.  But before we get into what we still want to do, let’s look at some fun numbers of what’s been done:

Trash:  If we tried to explain the amount of trash generated from the building upgrade, or what we’ve had to disposed from previous tenants, you’d think we were lying.  To date, we’ve gotten rid of an estimated  200 yards of trash.  To put that in perspective, that would fill a box that was over a MILE LONG by a MILE WIDE and a foot tall!  Math geeks: Feel free to correct me if I’m wrong.  And to our neighbors: We realize there is still trash outside.  We’re getting rid of it as fast as those roll off containers can come.

Units: The building consists of 56 units.  At this point, we’ve upgraded 30 of them.  And by “upgrade” that includes: Taking out the carpet, which is over the original hardwood floors, taking off the paneling on the walls, which is over the drywall (you can start to see where the trash comes from).  Sanding and refinishing the wood floors (not easy, the floors are beautiful, but they’re 75 years old). Painting the whole unit. New toilets, new vanity, new light fixtures, outlets, switches. New front doors, new window blinds, and more.  Upgrading a unit normally takes a good amount of time.  We’ve been upgrading units at a pace of about 2 a week since we’ve owned the place.  And this has to be coordinated with new leases to minimize downtime to help fund these upgrades.   It’s a balancing act: The manager gets yelled at by the owner if a unit is ready but not leased.  The manager gets yelled at by a tenant if the unit is leased and not ready.  Poor guy 🙂

Building interior:  It was, quite frankly, disgusting.  There is a lot of common area interior space (large open hallways). We thank our first “pioneer” tenants who moved in before this was addressed (they’ve been rewarded by lower rent. As the building gets better, rents go up. So bravery has it’s rewards).   In the last few months we’ve ripped out all the carpet in all of the common area hallways.  We’ve peeled up all the plywood and linoleum tile that was stuck over the entry and exists.  We’re in the process of cleaning and sanding the wood floors that were underneath.   We’ve fixed countless holes in the drywall.  Cleaned and painted most of the walls.  Removed dozens of signs that are, thankfully, no longer applicable (“No sleeping in hallways!”).   Each unit has a few windows looking into the hallway, each with several glass panes.  16 panes of glass per unit.  I’d estimate that half were broken and boarded up.  That’s almost 500 panes of glass that had to be replaced just in the interior units (we’re not done with this, but we’ve got most!).  The interior has also received new lighting: 16 recessed high end, low power, LED lights per building; 48 total.  This replaces the old florescent tube lights.  Also 20 hanging pendant lights per building; 60 total.   So over 100 new lights and lighting fixtures between the three building interior hallways to add safety and style.

Outside:  This is where we haven’t done as much as we’d like.  We’ve been primarily focused on units, and getting them ready for new tenants.  Each time we’re ready to tackle some “outside’ projects, our team gets called in to get a new unit ready, put in some new lighting, do the floors, or any number of the above listed projects.  That’s not to say nothing has been done.   We’ve ripped out most of the concrete in the center courtyard area to prep for our new landscaping   We’ve taken off the old ugly awnings (and put one new one on to see what we thought of it).  We’ve started some painting of the exterior non-brick surfaces.  We’ve put on a few black solar screens to help with energy efficiency but also the look of the property.   With the property better stabilized, this will be our next big effort. We’ve recently pulled permits to replace and fix bad fascia and soffits, after which all will be repainted along with all window trim.  After landscaping, we’ll be adding gated entry and perhaps replacing the railing work that exists now.  If there are any exterior / landscape designers that would like to volunteer their time, we’re open to it.  As we’ve mentioned many times: Design is NOT our strong suite 🙂

Cost: We debated sharing this, but figured why not.  As of Feb 1, there has been:

• $87,000 in labor
• $100,000 in materials
• $12,000 in misc costs and credits for cleaning
• Note this doesn’t include costs after Feb 1.

So about $200,000 spent so far in the 16 weeks we’ve owned the property, just under $2,000 a day.

We’re excited to have given this building a new life.  We still have a LOT of work to do but we feel the winds at our back now and the rest is stuff that’s more along the lines of “nice to do” vs. the other stuff that was critical to the property running correctly at all.

Have any questions or comments?  Feel free to leave them below, or check out our Holman page and feel free to share there.

 

In our continuing quest to find quality properties in quality locations  we welcome our new property at 2412 Southmore.

Located inside the loop, this building is a stones throw from the Texas Medical center (largest in the world!), and close to desirable spots such as Rice University, Herman Park, TSU, downtown, midtown, Montrose, and more.  This property represents our first in the area. It consists of 32 units — a mix of 1, 2, and 3 bedroom units.

Rents start at just $500/month.  As far as “bang for the buck” on rent and location, this one is likely our best.

We have literally no pictures that we’ve taken yet.  Apologies for the bad exterior picture.  And yes, the paint is terrible at the moment (some type of Army Surplus green?). Give us some time, we’ll fix it 🙂

(Photo credit from an old HAR listing.  Not sure from who)

 

While we wait for the lawyers to work out the details surrounding the closing, Fat Property has begun to upgrade and manage a new 38 unit property located 3802 Wipprecht.  This property represents our first sizable apartment complex outside of the Midtown/Montrose area.

The property is located just north of the Fifth Ward area of Houston, just a few miles from downtown, Heights, Montrose, and other hot areas.  So while it’s “close to it all”, we can’t say the location its in is our best.  However, it’s perfect for those wanting a large apartment close to everything, for a very low cost.

The building consists of 38 units, most of which are closed up and in need of work.  In order to jump-start this location  we’re renting large 1 bedroom upgraded units for $400/month*.

The units are very nice and our largest 1 bedrooms.  We’re putting in new appliances, new paint, new ceramic tile flooring, new ceiling fans, and more.  Pretty much new everything — and perhaps it’s overkill for a $400/month apartment but we want to do our best to get a good tenant base in there.  If this property were just a few miles south/west, they’d be $1,000/month.

If you’d like to apply for a unit, you know where to go. 

* $400/month rent is for those who have applied in advance and pay a full month rent as a deposit.  Otherwise rent is $450/month.  Picture is of the building today.  We plan on totally repainting the property as part of our upgrades.

Montrose and other areas of the inner loop of Houston are going nuts. It seems everywhere you look a new apartment or mixed use building is popping up.  So if rents are going up due to lack of supply, then surly all the new properties coming online will drive down rents?  Not really. Most being built are higher end “Class A” properties. Additionally, many of the properties are being built on top of where older more affordable properties (like the ones we own and manage) used to be.

KUHF ran an intersting story about this

(photo credit from story)

We admit it.  We’re deal junkies. We’ll sometimes do a deal just for deals sake.

In getting ready for taxes (boo!), we had to compile a list of all transactions we’ve done.  We had to note when a property was bought (and for how much), when it was sold (and for how much). An interesting number came about that surprised us.  Between the principle and the 5 1/2 years that Fat Property has been around, we’ve done about $15,000,000 in transactions. This is only the properties we’ve bought and sold as principle or as the company.  This doesn’t include properties we’ve helped buy or sell for clients who are using our serves for their own real estate transactions.

For the curious: We’ve purchased 34 properties and sold 14.  As you may know, we don’t like to sell property as our goal is to grow our holdings.  However, from time to time we’ll sell off a strategic property in order to pull out equity to finance additional deals (a side effect of being primarily self funded).

The $15,000,000 figure also does not include the properties current under contract to be purchased soon, which total almost $4,000,000.  Before the end of the first half of 2013 (as we hit 6 years old), we’ll be at over $20,000,000 in transactions done.  Not terrible for a first grader.

We’ve noticed a “downsizing” trend in the urban core areas where most of our properties are located.  People are moving away from the multi-thousand square foot monster pads located far away, and trading them for smaller units where they want to live.  Part of this is the increasing cost of fuel.  But the bigger driver is people wanting to live closer to work and play.

This trend is backed up when looking at most of the new construction in our favorite neighborhood:  Montrose. Many of the new units are much smaller than you’d expect.  This trend is being repeated all over the country, with some cities offering contests to developers to make the best small unit.

Here is an interesting story that shows this concept to the extreme:  New units that target 300 SF in size

(photo credit goes to the linked story)